The Impact of Online Reviews

The impact of online reviews on your business

This is the first of a two-part series about using online reviews to grow your business. In this post, we’ll get into some of the reasons that business owners are not leveraging online reviews as much as they could, and look at some studies by Harvard Business School, Berkeley, Microsoft, etc. on how much you can grow your business and sales with online reviews. In the next post, Growing Your Business with Online Reviews, we’ll get into some of the details of how to get reviews, the best ways to manage online reviews, as well as some specific tips regarding Yelp.

Most business owners ignore reviews, and most consumers really pay attention to them. Why is this? Well, let’s talk about some of the reasons why business owners don’t pay that much attention to online reviews.

Insider’s skepticism—The first reason is that many business owners have an insider’s view. They realize that sometimes reviews can be a less-than-accurate indication of how good a business is. At least, many times that’s the experience with their own business. So they don’t trust online reviews as much as the consumers do.

They’re too busy—Another reason is very simple. Business owners are too busy running their business and taking care of customers to worry about online reviews.

They’re a low volume business—There are different types of businesses, with different types of volumes. For example, a restaurant has hundreds of guests a day, whereas a contractor may have only a few clients a month. Or with bigger projects, maybe even a few clients a year. For example, in the past I provided a very high-value service to a small number of clients (although the number of clients that I serve is probably about to change with the availability of the new local SEO programs and reviews management services). Businesses with high volumes of customers have a much easier time getting reviews than businesses with high-ticket, low-volume customers. Thus, with different kinds of businesses, some businesses are much more aware of reviews than others.

They don’t know what’s posted—If somebody has left a review, whether it’s positive or negative, and you don’t know about it, then you don’t have an opportunity to respond. Many times if there’s a negative review, after a few weeks have gone by you really have no idea who the customer was, and it’s difficult to respond. It’s much better if you know immediately when something gets posted.

They don’t know how to respond—If a review has been posted and you’re aware of it, you might simply not know how to respond. Perhaps you’re not sure where to go to respond, or you’re not quite sure what to say, or how to respond to that negative review.

They don’t know how or when to ask for reviews—A lot of times we have really satisfied, really happy customers, but we don’t know how to ask for reviews. We feel awkward asking for reviews. We don’t know when to ask for them; what the right time is.

They don’t know how to deal with negative reviews—Sometimes we business owners don’t pay attention to reviews simply because we just don’t know how to deal with negative reviews. So maybe we just ignore it and it’ll go away.

They’re frustrated because Yelp hides a lot of our good reviews—One reason I hear frequently is that people are frustrated, especially with Yelp. It seems that many business owners are frustrated because Yelp hides a lot of their good reviews. They say “I’ve asked customers for reviews. I’ve had really good reviews left on Yelp, but they don’t get published. So, why bother?” Well, we’ll address that a little bit in the next post.

Business Owners and Online Reviews—The Stats

Here are some statistics that are really important for you and your business. It may sound like I’m just going to throw some numbers at you, but these statistics are really important and could have a big impact on your business.

The percentage of consumers that rely on online reviews has grown from 25% to 50% to 70% to 85%, to now close to 95%. More than 90% of consumers really pay attention to online reviews when they’re making a buying decision.

In contrast, only half of business owners think that reviews are important, and 25% of business owners think that reviews are not important at all.

While 95% of consumers trust or pay attention to online reviews, at least 80% of consumers (whether it’s right or it’s wrong) trust online reviews as much as personal recommendations. Think about it—8 out of 10 of your customers believe that online reviews are at least as trustworthy as their friend’s recommendation. Nine out of 10 (or more) of your potential customers are paying attention to those reviews.

The majority of business owners do not trust online reviews, while the vast majority of consumers do. Here is another interesting discrepancy:

More than half of business owners think that if they get online reviews it should be on a specialized industry-specific website.

In contrast, most consumers look at Google, Facebook, BBB, and Yelp more than an industry specific website.

And here are some stats from a recent independent survey of business owners.

Almost 90% of business owners do not ask for online reviews. Their customer is happy with the service, but they just don’t ask for the review. At least half the time, it’s because they didn’t think of it. We just don’t think of it at the right moment to ask the customer. If you are actively managing your online reviews, you will have an advantage over 90% of your competitors.

Seventy percent of business owners do not monitor their online reviews, and of those that do, most do not look at more than a few websites a month (out of the more than 50 important review sites).

Two thirds of business owners think online reviews are biased or unfair. Many believe that Yelp (a large player in the review space) favors businesses that advertise with Yelp (even though Yelp advertising is 70 to 100 times more expensive than Google or FB advertising or a well run local SEO campaign). Therefore, they just don’t think it’s worthwhile paying attention to their Yelp reviews.

Now here’s something you might want to just keep in the back of your mind. The next time you’re looking for a vendor, notice how reviews affect you. A lot of times if I ask someone outright, “Do you pay attention to online reviews?” they might say, “No. No, I don’t. Not really.” But when they go out and they’re searching for a plumber when the toilet is broken, they might pay attention to those online reviews a lot more than they think.

So if you think about it right now you might say, “I don’t pay attention to online reviews,” but next time you’re searching for a vendor you might catch yourself doing so. I just want you to notice that, and notice how the reviews actually do affect you in your search.

Reviews affect your referral business

Now, some business owners say “Oh, I get all of my business by referral.” And that’s wonderful. That is absolutely the best and top way to grow your business. However, this is something you really need to keep in mind if you’re dependent on referrals for growing your business.

Eighty percent of consumers trust online reviews at least as much as that personal recommendation from their friend. Here’s what happens. I ask my friend or my neighbor, “Hey, do you know a good plumber?” and he gives me a name. The first thing I’m going to do before I call that plumber is I’m going to look them up on Google. And I’m going to check out their website. And if I type in the plumber’s name in Google and I see some negative reviews, guess what? I’m really going to hesitate about calling. A lot of consumers do this. So you may not think that your digital marketing or your online reviews are that critical in growing your business but they can have a huge impact on the number of referrals you get that are actually calling you.

This is just like Robert, a local contractor, who told us, “I get all my business from referrals.” What Robert didn’t realize was that more than half of the referrals he got were not calling him! People got his name from a friend, but either they couldn’t find him online when they went to look him up later or they found him but they wouldn’t call a business that didn’t have many online reviews or they found a negative review that Robert didn’t know about and decided based on that not to call him. Think about it—fully half of Robert’s business was going to his competition because of reviews.

So here’s the bottom line:

Reviews can really help grow your business.

I’ll give you a couple of different studies that were done. One is from Berkeley School of Business. Another one is from Harvard University School of Business. Another study was commissioned by Microsoft, jointly done with Boston University. A couple of studies were from marketing firms.

A study by two Berkeley researchers published in The Economic Journal found that a half-point difference in the average review rating (the average number of “stars”) increased a restaurant’s chance of selling out its evening seats by almost 50%.

Another study by a marketing firm found that a one-point difference in star rating will increase the click-through rate of people who find you in online search by 10% to 15%. They also found that businesses that had a negative average review rating (one or two stars) got even fewer clicks than businesses with no reviews. So obviously, if you’ve got some reviews, you want the rating to be pretty good.

In the same study, jumping up three points in your star rating will double your click-through rate and presumably will double your business as well.

Another study found a 20% increase in sales from a one-star increase in review rating.

Another study done by a marketing firm found that going from a 2-star rating to a 3-star rating more than quadrupled the number of mobile phone calls generated, and going from a 3-star rating to a 4-star rating doubled that number again! So that means going from 2 stars to 4 stars increased the phone calls on the mobile phone (mobile search) 8-fold.

The joint study done by Microsoft and Boston University looked at hotels, and found that increasing the star rating by one point created a 26% increase in hotel bookings, and the hotels were also able to charge more at the higher demand level. So the hotels with a one-star increase in rating were able to charge more, and still get a 20% to 26% increase in bookings—so their revenues were up significantly.

One Review Can Make a Difference

One review can make a difference in your star rating, and here’s how that works. If your average review rating is 3.24, it will display on most review sites as 3.0. That means even one more 4 or 5 star review can tip your average up to 3.26 or higher and bump you up by half a star. It makes you display as three and a half stars. So one review can make a big difference if you’re on the fence in your point swing.

In our next post, Growing Your Business with Online Reviews, we’ll cover best practices for building your online reviews. We’ll talk about how to ask for online reviews, and we’ll talk about Yelp issues in more detail.

I’d like to close by asking you for a review. If you’ve enjoyed this post, or my other posts and could take 60 seconds to leave an online review, go to your platform of choice (Google, Facebook, Yelp, etc.), look up Cloud Mountain Marketing, and make your voice heard.

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